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WI: Payment Under Legal Mal Policy "Triggers" Under Insured Coverage

Degenhardt-Wallace v. Hoskins, Kalnins, McNamara & Day 689 N.W.2d 911 (Wis. App. 2004)

WI: Underlying insurance suit: How to contstrue policy language

Student Contributor: Jeff Cain

Facts: Client is involved in a car accident, and retains lawyer. The defendant  driver in the  other car  has a bodily injury liability limit of $50,000. Client’s policy had an underinsured motorist policy with $100,000 limit. Lawyer fails to file suit before the statute of limitations expires. Client sues lawyer for legal malpractice. The lawyer argued that he should not be liable for more than $50,000, since any amount greater than that would be covered by the client’s underinsured motorist policy. The insurance company, who was the carrier for both drivers in the accident, argued that they did not need to pay the client any amount, because the insurance policy said that there is no coverage until the full amount of the bodily injury insurance has been used up, and no insurance had been used in this case due to the lawyer’s malpractice in blowing the  statute of limitations.

Issue: Does a lawyer who commits legal malpractice by blowing  the statute of limitations owe the full amount of insurance that the client would have received from both the defendant driver and the client’s own underinsured coverage  or only the amount that the lawyer would have recovered  from the underlying defendant driver, if he had successfully filed suit against the offending driver?

Ruling: The lawyer is only liable for the amount that he would have won if he had filed suit against the offending driver. But the under insured carrier is not off the hook. It still owes the client the proceeds of its underinsured coverage even though the liability payment was made by the legal malpractice carrier, instead of driver’s carrier. (PS: The liability carrier and the underinsured carrier were the same company).

Lesson: Legal malpractice insurer’s payment of what would have been paid by a defendant driver’s insurer but for  the  lawyer’s blowing the statute of limitations in an auto injury case "triggers" the required payment necessary to collect benefits under a first party underinsurance policy. 

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Posted in: Wisconsin